Purchase return journal entry is a Accounts Payable(Creditor) A/c Debit because This decreases the amount owed to the supplier and current liability, reflecting the return of goods. Credit to Purchase Returns, This records the return of goods, reducing the total purchases for the period. Purchase returns occur when a business returns goods to its supplier. This could be due to defects, incorrect items received, or any other reason that warrants the return of purchased goods. Properly recording purchase returns is essential for maintaining accurate financial records and inventory levels.
Key Concepts
- Purchase Returns: Goods returned to suppliers, reducing the total purchases.
- Accounts Payable: The liability account reflecting amounts owed to suppliers, which will be reduced when goods are returned.
- Inventory: The account representing the value of goods held by the business, which will decrease when goods are returned.
Journal Entry for Purchase Returns
Example Scenario
Assume a company returns office supplies worth ₹10,000 to its supplier on 10-07-2023 due to defects.
Step-by-Step Journal Entry
- Record the Purchase Return
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 10-07-2023 | Accounts Payable | 10,000 | Return of defective office supplies to supplier | |
| 10-07-2023 | To Purchase Returns | 10,000 | Record purchase return |
Explanation
- Debit to Accounts Payable: This decreases the amount owed to the supplier, reflecting the return of goods.
- Credit to Purchase Returns: This records the return of goods, reducing the total purchases for the period.
Conclusion
Accurately recording purchase returns is crucial for maintaining correct financial and inventory records. Properly managing these transactions ensures that the business’s liabilities and inventory levels are accurately represented in the financial statements, contributing to better financial management and reporting.